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NAFTA Trade Ministers to Square Off Over Hard-Line US Demands

NAFTA Trade Ministers to Square Off Over Hard-Line US Demands

Wages have been a contentious issue in NAFTA renegotiation talks because salaries are much lower in Mexico compared to its two northern neighbors, and the USA especially has argued that it places its automotive and other manufacturing industries at a distinct disadvantage.

"Right now, I'm giving it even odds", said one US observer familiar with the talks, referring to the possibility of their collapse.

The verbal blows concluded Round 4 of talks to renegotiate NAFTA. Nafta now lets manufacturers - such as garment makers - create cross-border supply chains in which parts of a final product are sourced from different countries before being assembled in a final location.

The first key disagreement is over "rules of origin".

Discussions remained tense as the US government insists on several big changes to the 23-year-old deal that could hurt Canada and Mexico. It's possible that his administration is trying to sabotage the agreement to justify a withdrawal, said Paul Ashworth, the chief United States economist at Capital Economics.

U.S. Chamber of Commerce President Tom Donohue said in a speech recently that the Trump administration's proposals are "unnecessary and unacceptable". They have also put forward a clause, called "twilight" that could put an end to the NAFTA by five years.

He argued that Mexican and Canadian trade negotiators are refusing to accept provisions they have agreed to in the past, including portions of the Trans-Pacific Partnership (TPP) agreement.

Lighthizer said he has see no sign that Mexico and Canada are ready to make the major changes needed to the update pact. Instead of entering the USA duty free, Mexican imports would be subject to tax rates set by the World Trade Organization. However, Mexican Economy Secretary Ildefonso Guajardo told CNNMoney in April that such a proposal wouldn't work for him.

Mexican economist and financial analyst Luis Rubio said the greatest danger to Mexico if NAFTA is scrapped is loss of confidence in the nation as a place for investment.